MLM VS. Pyramid Scheme: Spot the Difference

There are so many budding businesses in today's time, especially that the new technology has made it easier for people to find ways on how they can dramatically change their lives. The internet has given people, from the different areas of the world the chance to earn money in the most convenient way, reaching the point that they don't necessarily have to leave the comforts of their own home. But with all these good things, the bad ones are never out of the picture. Today, especially in the field of multi level marketing business, confusion as to whether the business is a real deal or just a pyramid scheme is driving people crazy. There have been so many hopeful individuals who just wanted to earn money but they end up getting fooled and losing their money and wasted much time and effort. This is why knowing the thin line that separates an MLM business from a pyramid scheme is highly important.

Pyramid Scheme

A pyramid scheme happens when one person recruits another individual who would give the first person money and receive no value for such money, except the opportunity to be able to recruit other people below them who will in return give them the money. If all that happens is simply an exchange of money for the mere chance to recruit other people to pay money, this is not a business. This is simply an illegal pyramid scheme. Eventually, this scheme would fail when there are no more individuals to recruit. The last recruits who signed up would end up losing their money because the pyramid would collapse under its own weight. And when there are no more people to recruit, the scheme would just come to a halt.

MLM Marketing/ Network Marketing

A legal multi level marketing or also known as network marketing involved getting recruited to be able to sell a product or service that has an inherent value. If you are the recruit, you would earn money by selling that product or service. You may also be encouraged to recruit others, given a structure that would reward you with your recruiting efforts when those below you would sell products and get the small percentage of the profit, but in this case, you are not required to do so. The concept behind this network marketing is a distribution model that is based most of the time on word-of-mouth form of advertising. Recruits earn their profit in return for selling products/services, and they choose to recruit others, they can receive a part of the profit.

Spot the Difference

The easiest and best way to spot an illegal pyramid scheme over a legitimate network marketing opportunity is being able to determine if there is an involvement of a legitimate product or service. When there is none, it is definitely a pyramid scheme and all you have to do is walk away and never dare to look back.

The problem takes place when a scheme has been made to look like a legitimate opportunity. They might have a product or service. But the thing is, you make a very little or no money at all from the sale of the that product/service. Or, another case is that you will only earn money when selling the product or service becomes a part of recruiting new members to the organization. In this case, evaluate carefully the kind of organization and how the system works before jumping into it.